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This is how you lose a major tech company.

Dear Access member,

We’ve got four items for you at the top, and our roundup of the week as well as a summary of today’s other news below.

I always ask for feedback, even in our free newsletters. But you’re paying members, and we really want to make you happy. We received some suggestions for article topics and possible new services from some of you in the last few weeks: Please keep those ideas coming. I owe a few of you emails about these ideas — thanks for your patience!

I’d like to draw your attention today to the latest installment of Jiayun Feng’s Chinese Corner — a weekly roundup of what Chinese people are reading online. We’re going to keep this free access for another few weeks while we try to perfect it, and then we’ll put it behind a paywall only available to Access members.

Have a great weekend!

—Jeremy

1. Micron: This is how you lose a major tech company.

Paul Mozur of the New York Times tells a dramatic tale (paywall) of employees at a chip-making company in Taiwan scrambling to get rid of USB drives, laptops, and documents before a police raid, or as he put it on Twitter:

This is how you lose a major tech company. First, a Beijing-backed buyout offer. Then friendly Chinese partnership proposals. Then the tech gets stolen. Then when you file a complaint in court, you get hit with investigations in China, your biggest market.

Micron Technology, Inc. is based in Boise, Idaho, and makes semiconductor devices, including dynamic random-access memory, flash memory, and solid-state drives. The Times article says:

  • Micron rejected a $23 billion takeover offer from a state-controlled Chinese company in 2015 (paywall). Today, it faces a lawsuit and an investigation in China, which accounts for about half its $20 billion in annual sales.

  • After it rejected the offer, Micron “was the target of the heist in Taiwan, according to officials there and a lawsuit the company has brought against the Taiwanese company that employed the engineers, UMC, and the Chinese company it says wanted access to the technology, Fujian Jinhua Integrated Circuit Company.”

  • Micron’s lawsuit says the state-backed Fujian Jinhua Integrated Circuit decided to build a $5.7 billion factory in Fujian Province, and two years ago, “tapped UMC, a Taiwanese company, to help it develop technology for the factory.” But instead of developing the tech themselves, Micron alleges the company stole it.

  • “UMC lured away engineers from Micron’s Taiwan operations with promises of raises and bonuses, according to the Taiwanese authorities.” The ones who agreed were asked to take Micron intellectual property with them.

  • The thieves did a poor job covering up their tracks: Micron “grew suspicious, according to its court documents, after discovering that one of its departing engineers had turned to Google for instructions on how to wipe a company laptop,” and then at a recruiting event in the U.S. where Jinhua and UMC were trying to recruit Micron staff, using “PowerPoint slides that used Micron’s internal code names.”

  • Other companies “may face predicaments similar to Micron’s” — the Times cites a  chip produced by state-owned Yangtze Memory Technology Company (YMTC), which one analyst said “is virtually identical to Samsung’s, which makes it pretty clear they’ve been copying.”

2. Hainan follies: Quickly censor the news about the uncensored internet!

After reports in April of a new type of free trade zone on Hainan Island, and possibly even legal gambling, on June 6, the Hainan provincial government published a “three-year action plan to promote the internationalization level of Hainan’s tourism” (提升海南旅游国际化水平三年行动计划 tíshēng hǎinán lǚyóu guójìhuà shuǐpíng sānnián xíngdòng jìhuà).

  • The plan aims to increase tourist arrivals by 25 percent annually to at least 2 million by 2020. The target number of inbound international flights is 70 by the end of this year, 85 by the end of 2019, and 100 in 2020.

  • 50,000 foreign service workers will be needed to enhance the tourism industry, and the provincial government will maximize use of Hainanese locals who have studied abroad. The citizens of 59 countries will be able to visit Hainan without a visa, and other enticements for foreign visitors and investors are mentioned. There are also incentives for foreign investment in tourism-related sectors.

  • Advertising on international TV networks is part of the plan: The BBC, CNN, and CNBC are named, as Hainan will also promote itself on social media platforms, including Facebook, Twitter, WhatsApp, and YouTube, all of which are, of course, blocked in China.

  • The plan calls for the establishment of zones where “foreigners can get regular access to foreign popular social media platforms Facebook, Twitter, and YouTube” (外国人可正常使用国外流行的社交媒体脸谱Facebook、推特Twitter、优途YouTube wàiguórén kě zhèngcháng shǐyòng guówài liúxíng de shèjiāo méitǐ liǎnpǔ, tuītè, yōutú).

  • Here’s where the story takes a hilarious turn: Today, various media, apparently led by state-owned but feisty The Paper, reported on the plan, highlighting the clause about access to foreign social media.

  • “The plan though quickly faced some criticism on Chinese social media,” reports Reuters, quoting a Weibo user, who uses the handle “late night cat”: “This is an entirely blatant, contemptible, imprudent, low behavior of reverse racism. This is garbage!”

  • By 8 p.m. Beijing time, the Hainan provincial government had removed the plan from its website, and stories on it by media such as The Paper had all been deleted. You can still find them on Google’s cache: Hainan government plan, The Paper story.

“Separately, the provincial government in May unveiled its ‘100-Day Campaign to Attract Businesses,’ in which it identified a series of A-list names and organizations in the corporate world it plans to talk to,” including Warren Buffett, “U.S. media giant Time Warner, storied British public school Eton College, South Korea’s Samsung and global law firm Baker & McKenzie.” That’s from the South China Morning Post’s story on the deleted Hainan government report.

3. Erasure of non-standard Mandarin in Shanghai

Tianyu M. Fang reports for SupChina that the word waipo (外婆 wàipó; maternal grandmother) is under attack in Shanghai.

  • The state-owned Shanghai Education Publishing House erased the term from a second-grade textbook, and replaced it with the term laolao (lǎolao 姥姥), which has the same meaning but is more commonly used in northern China — *ahem,* where Beijing is located.

  • Waipo is widely used in southern China, including Shanghai, but Beijing has sought to promote “standard Mandarin” (普通话 pǔtōnghuà) since its introduction in 1955, to the detriment of local linguistic cultures.

  • More than 100,000 people read this WeChat article (in Chinese), which originally  exposed the change.

  • “This kind of change is a form of cultural hegemony,” a popular Hong Kong journalist named Luwei Rose Luqiu wrote on Weibo (in Chinese).

Read more about the case on SupChina.

4. Will China’s dodgy internet detox clinics benefit from WHO’s decision?

Gaming addiction is now officially classified as a mental health condition by the World Health Organization (WHO). This is good news for China’s many digital detox camps, which have called internet addiction a disease for years. Some of these camps rely on abusive treatments to “cure” their “patients.”

  • In the draft version of the 11th International Classification of Diseases (ICD) released by the WHO on Monday, “gaming disorder” — an addiction to playing video games — is, for the first time, formally recognized as a mental health issue by the agency, classified together with gambling under “disorders due to addictive behaviors” and characterized by behavior like “continuation or escalation of gaming despite the occurrence of negative consequences.”

  • Many Chinese parents have long been convinced that excessive gaming is an actual disease. Seeing a lucrative opportunity in these parents’ fear and panic over video games, internet addiction “boot camps” began to proliferate in China a few years ago.

  • Usually without clinical qualifications, these camps reinforce the “gaming addiction is a mental disorder” argument and use controversial methods to correct the behavior of their “patients.” As exposed by a wide range of news publications, some of these facilities treat teens with electroshock therapy and other forms of physical punishment.

  • In 2017, an 18-year-old teenager died days after he was sent to an internet detox facility in Anhui Province (see BBC report). While the incident prompted the central government to draft a law to crack down on such abuses, similar institutions can still be found across China.

With the WHO’s decision, these camps will be more appealing than ever to parents worrying about their children’s obsession with video games. “We need to make sure that gaming addiction is becoming a condition that will encourage people to pay more attention to mental health, rather than give these camps opportunities to flourish again,” the Beijing News warned in a commentary (in Chinese).

—Jiayun Feng

—–

Our whole team really appreciates your support as Access members. Please chat with us on our Slack channel or contact me anytime at jeremy@supchina.com.

—Jeremy Goldkorn, Editor-in-Chief


Here are the stories that caught our eye this week:

  • Tit-for-tat tariffs went into effect in the trade war that was “ignited” a week ago, escalating after the U.S. imposed $50 billion in tariffs on June 15 and China quickly retaliated in kind. Along with a proportional tariff response, the People’s Daily declared that it had lost all faith in the “rude and unreasonable, selfish and headstrong” Trump administration.

  • Donald Trump then prepared to go all in on his tariff-first strategy, announcing on June 18 that he was preparing $200 billion in additional taxes, followed by another $200 billion after that if China did not back down. China promised “qualitative measures” in response — i.e., harassment of American firms, restriction of American tourism in China, or even boycotts of American goods — as China does not import enough from the U.S. to equivalently tax even $250 billion in goods, let alone $450 billion.

  • The trade war did not stop Google from investing half a billion in China’s second largest ecommerce firm, JD.com, one of the largest moves yet in China by the Silicon Valley giant, which has maintained a low profile there since 2010.

  • Kim Jong-un made his third trip to China in three months, furthering his Trump-aided transformation from a reclusive and isolated leader to an important player on the world stage. China has apparently become more comfortable with its relationship with the North, announcing the visit as it happened and loosening some sanctions in recent weeks, though Beijing remains worried that North Korea-U.S. communication could weaken the North’s loyalty to itself.

  • Xi Jinping offered economic know-how to Kim, who inspected the Chinese Academy of Agricultural Sciences — an institution responsible for many of the important aspects of China’s own economic reform decades ago — on June 20. Analysts are divided on whether there is a sincere desire in the North for economic reform, but if it were to happen, China would be the source of much of the necessary money and knowledge. Some observers interpreted the presence of Premier Pak Pong-ju, the top economic official in North Korea, as a sign that Kim is seriously interested in working with Xi.

  • Jiangxi Province put restrictions on abortion, requiring that all women who wish to have one after 14 weeks of pregnancy jump through regulatory hoops. The regulation is targeted at preventing gender imbalance at birth, but many on China’s internet saw the move as oppressive to women or an excuse to not address the province’s rampant gender discrimination after birth.

  • Chinese healthcare companies could quickly become behemoths, as the government has cut red tape, and venture capital investment in the sector has exploded from $1 billion in 2013 to $11.7 billion in 2017, according to McKinsey & Co.

  • Australia-China relations sunk to new lows, as Beijing delayed wine imports from its once-friendly Pacific trading partner. Beijing and Canberra are at odds over media coverage — China is apparently upset that Australia can’t just censor criticism of it in the media — in addition to having grievances over attacks on Chinese living in Australia, and an expected Australian ban on Huawei participating in the country’s 5G mobile phone network.

  • Chinese state media celebrated after the U.S. withdrew from the UN Human Rights Council, furthering a globally popular narrative that the U.S. is abdicating world leadership and China is seeking to fill it in some fashion.

  • Cambodia’s client state relationship to China was nearly completed this week, when Cambodian officials asked China for more than $100 million in military gear, and China obliged.

—Lucas Niewenhuis


BUSINESS AND TECHNOLOGY:

  • Stock market wobbles
    Asian stocks end ugly week with China on the edge of a bear market / WSJ (paywall)
    “China’s Shanghai Composite Index dropped 0.2%, recovering slightly after steeper losses in early trading.”
    China takes an edge in stocks to a trade war / Bloomberg (paywall)
    Chinese stocks are flirting with bear market territory as trade worries fester / CNBC

  • American business in China
    Which American CEOs did Xi Jinping meet in Beijing? UPS, Pfizer, Goldman all on the list / SCMP
    “American executives from the likes of UPS, Pfizer, Cargill, Prologis and Goldman Sachs were at a gathering in Beijing when President Xi Jinping called for multinationals to help fight ‘protectionism’ and told them China would remain open for business, according to images in state media reports and on social media.”

  • Why gamers are up in arms over Steam’s China deal
    Gaming platform Steam rolls into China / Magpie Digest
    The Chinese gaming community has reacted extremely negatively to the news of the game Steam’s official release in China, because it will partner with a local company over which the government will have much more control.

  • Education companies
    VIPKID valued at RMB 20 billion after its $500 million Series D+ / TechNode
    “China’s largest K-12 online education startup VIPKID announced that it has completed its Series D+ round of financing, raising a staggering $500 million — by far the largest round ever secured in the online education sector… The investment has bumped VIPKID’s valuation up to RMB 20 billion [$3.07 billion].”

  • Drone police
    Changchun law enforcement use drones for city management / TechNode
    “Government officials from Chaoyang District in Jilin’s Changchun City established its Drone Law Enforcement Unit (无人机执法中队) in May, with the new division actively taking on city management duties. Drones with cameras are connected via a smart remote operation system equipped with an iPad-like screen. Trained law enforcement officers control the drones to patrol, monitor, and investigate areas where human forces are unable to access.”

  • Gray rhinos ?
    China confirms it transferred ownership of Anbang Insurance to government / WSJ (paywall)
    “The China Banking and Insurance Regulatory Commission has approved the transfer of 98.23% of Anbang to China Insurance Security Fund, according to a statement Friday from the regulator.”

  • Xiaomi
    For Xiaomi, simultaneous listings may have been too much / Caixin (paywall)
    “Smartphone-maker Xiaomi’s decision to put off its much-anticipated issuance of Chinese depositary receipts (CDRs) is likely due to concerns that the securities would have been subject to too much volatility if they had started trading at the same time as the company’s initial public offering (IPO) in Hong Kong.”

  • On-demand bike industry
    Bike-sharing growth hits the brakes / Caixin (paywall)
    “After experiencing a massive boom in 2017, China’s bike-sharing market is expected to shift into a slower lane this year, a report said.”

POLITICS AND CURRENT AFFAIRS:

SOCIETY AND CULTURE:


VIDEO OF THE DAY

What is China watching? This week: A 66-foot-long sticky rice dumpling, the world’s longest glass circular bridge, firefighting drones and robots, and a celebration of International Day of Yoga. What more could you ask for?


ON SUPCHINA

Chinese Corner: Secrets of a female Go champion, and making money from online subcultures, or not

SupChina’s Jiayun Feng writes a weekly column on what China’s reading each week. In this roundup: Subcultures and the survival of minority interest websites, some questionable notions about women’s ability to think analytically, “new gay icon” Wang Ju, and nostalgia for the simpler times of the 1980s.

China Sports Column: World Cup drawing nearly 100 million prime-time viewers in China

China’s national soccer team remains a disappointment, but the long-suffering fans have more than delivered during this World Cup so far, despite a viewing schedule that’s about to get a bit worse. Just a little under 100 million viewers tuned in to at least a portion of the 8 p.m. game between Portugal and Morocco on June 20.

SupChina News Quiz, June 16–22: China turns on Trump, and other news from Dragon Boat Festival week

What’s up in China? Test your knowledge of the news with this fun eight-question quiz, and then tweet your score to @supchinanews! Check back every Friday for a new challenge.

The People’s Republic of Chai-Na

In the campaign to turn Beijing into a “high-level” international city, the Chinese government is determined to finally stamp out any and all manner of informal settlements, whether they are inhabited by artists or by migrant workers. How do artists in Beijing cope with the inevitability of eviction and demolition?

China Unsolved: Who poisoned Zhu Ling?

A talented student, a mystery illness, an obvious suspect. Decades later, the notorious case of the poisoning of Zhu Ling — and the accusations against Sun Wei — still refuses to die.

Japan’s World Cup win was ‘Asia’s victory,’ says Chinese newspaper

Japan made history on Tuesday when it defeated Colombia 2-1 in Saransk, Russia, becoming the first Asian team to ever beat a South American side in the World Cup. Let’s take a look at the polar opposite reactions of two major Chinese newspapers.

Sinica Podcast: The saga of CEFC and China’s push into Central and Eastern Europe

Martin Hála, a China scholar from the Czech Republic and founder of Project Sinopsis, which seeks to inform the Czech public about China and its burgeoning role in the region, joins Kaiser Kuo in Prague to discuss the story behind the rise and fall of a mysterious Chinese company called CEFC.

TechBuzz China: Meituan, the Super App That Won Against a Thousand Clones

Meituan-Dianping, one of China’s most valuable private companies, is the result of a $15 billion merger between the Groupon clone Meituan and the Yelp predecessor Dianping. How did it become so successful?

Xi Jinping and China get the John Oliver treatment

John Oliver devoted a 20-minute segment on a recent episode of HBO’s Last Week Tonight to China, focusing much of it on Xi Jinping and his two major ambitions: the Belt and Road Initiative (including Chinese media’s ham-fisted attempts to promote it) and his anti-corruption drive. As far as mainstream American parodies of the Chinese government go, this one is pretty good.

All the different zongzi one can eat during the Dragon Boat Festival

Duanwujie 端午节 — the fifth day of the fifth month on the lunar calendar — is known to English speakers as the Dragon Boat Festival. It’s a day for racing dragon boats and eating zongzi — glutinous rice cakes — which these days come in all shapes and sizes, colors and textures. Take a look for yourself.

Inside the Chinese censorship rabbit hole

On Chinese social media, Xi Jinping, ejaculation jokes, and the Relevant Organs parody Twitter account are among the subjects that are no-gos. But what occasionally does get past the censors might surprise you.

Kuora: Mao Zedong and the archetype of the ruthless Chinese uniter

Mao Zedong takes his place in Chinese history as a ruthless uniter, alongside characters like Ying Zheng 嬴政 — better known as Qin Shi Huang 秦始皇, the first emperor of the Qin dynasty — and Cao Cao 曹操 — the ruler of Wei during the Three Kingdoms period that followed the collapse of the Han dynasty. All three are viewed generally with the same mixture of admiration and contempt.

‘Jurassic World: Fallen Kingdom’ resuscitates China’s box office

Jurassic World: Fallen Kingdom raked in a healthy $117 million in China in its opening weekend, rescuing an otherwise tepid week for the country’s box office. Analysts have pointed out that in the last few years, the Dragon Boat Festival holiday has been dominated by Hollywood blockbusters, with domestic productions having a hard time battling imported films.

The Caixin-Sinica Business Brief, episode 52

This week on the Caixin-Sinica Business Brief: Additional duty imposed on Chinese imports by the Trump administration, China’s economic growth in May, Didi Chuxing’s new policy of “same-sex rides,” Doug Young on the evolving story of ZTE, and more.

Video:

  • The world’s longest glass circular bridge was completed in Xinmi, Henan Province. It is suspended 360 meters (1,181 feet) above the ground, and is nine meters (29 feet) longer than the Grand Canyon Skywalk in Arizona.

  • Firefighting drones and robots are emerging in China, taking on tasks such as scaling high-rise buildings, getting to hard-to-reach areas that firefighters can’t, and locating trapped people.

  • China celebrated International Day of Yoga on June 21.

  • The largest sticky rice dumpling, or zongzi, of the year was made by 50 people over 13 hours, using 220 pounds of rice and 44 pounds of salt-cured meat. Just in time for the Dragon Boat Festival on June 18!


PHOTO FROM MICHAEL YAMASHITA

Vegetable and fruit market

Vendors sell fresh vegetables and fruits in Xiaguan, Dali, Yunnan Province.

Jia Guo

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Jeremy Goldkorn

Jeremy Goldkorn worked in China for 20 years as an editor and entrepreneur. He is editor-in-chief of SupChina, and co-founder of the Sinica Podcast.